BUSDOCS/1515937.1
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT ("Agreement") is made this 1st day
of December, 2005, by and between Xxxxx Xxxxxx Fund Management
LLC, a Delaware limited liability company (the "Manager") and
Salomon Brothers Asset Management Inc, a Delaware corporation
(the "Subadviser").
WHEREAS, the Manager has been retained by Xxxxx Xxxxxx Income
Funds (the "Trust"), a registered management investment company
under the Investment Company Act of 1940, as amended (the "1940
Act") to provide investment advisory, management, and
administrative services to the Trust with respect to a series of
the Trust;
WHEREAS, the Manager wishes to engage the Subadviser to
provide certain investment advisory services to the Trust with
respect to the series of the Trust designated in Schedule A
annexed hereto (the "Fund") and Subadviser is willing to furnish
such services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. In accordance with and subject to the Management Agreement
between the Trust and the Manager with respect to the Fund (the
"Management Agreement"), the Manager hereby appoints the
Subadviser to act as Subadviser with respect to the Fund for the
period and on the terms set forth in this Agreement. The
Subadviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. The Manager shall cause the Subadviser to be kept fully
informed at all times with regard to the securities owned by the
Fund, its funds available, or to become available, for
investment, and generally as to the condition of the Fund's
affairs. Manager shall furnish the Subadviser with such other
documents and information with regard to the Fund's affairs as
the Subadviser may from time to time reasonably request.
3. (a) Subject to the supervision of the Trust's Board of
Trustees (the "Board") and the Manager, Subadviser shall
regularly provide the Fund with respect to such portion of the
Fund's assets as shall be allocated to the Subadviser by the
Manager from time to time (the "Allocated Assets") with
investment research, advice, management and supervision and shall
furnish a continuous investment program for the Allocated Assets
consistent with the Fund's investment objectives, policies and
restrictions, as stated in the Fund's current Prospectus and
Statement of Additional Information. The Subadviser shall, with
respect to the Allocated Assets, determine from time to time what
securities and other investments will be purchased, retained,
sold or exchanged by the Fund and what portion of the Allocated
Assets will be held in the various securities and other
investments in which the Fund invests, and shall implement those
decisions, all subject to the provisions of the Trust's Trust's
Declaration of Trust and By-Laws (collectively, the "Governing
Documents"), the 1940 Act, and the applicable rules and
regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC") and interpretive guidance issued
thereunder by the SEC staff and any other applicable federal and
state law, as well as the investment objectives, policies and
restrictions of the Fund referred to above, and any other
specific policies adopted by the Board and disclosed to the
Subadviser. The Subadviser is authorized as the agent of the
Trust to give instructions with respect to the Allocated Assets
to the custodian of the Fund as to deliveries of securities and
other investments and payments of cash for the account of the
Fund. Subject to applicable provisions of the 1940 Act, the
investment program to be provided hereunder may entail the
investment of all or substantially all of the assets of a Fund in
one or more investment companies. The Subadviser will place
orders pursuant to its investment determinations for the Fund
either directly with the issuer or with any broker or dealer,
foreign currency dealer, futures commission merchant or others
selected by it. In connection with the selection of such brokers
or dealers and the placing of such orders, subject to applicable
law, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) to the
Funds and/or the other accounts over which the Subadviser or its
affiliates exercise investment discretion. The Subadviser is
authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio
transaction for a Fund which is in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction if the Subadviser determines in good
faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of
either that particular transaction or the overall
responsibilities which the Subadviser and its affiliates have
with respect to accounts over which they exercise investment
discretion. The Board may adopt policies and procedures that
modify and restrict the Subadviser's authority regarding the
execution of the Fund's portfolio transactions provided herein.
The Subadviser shall exercise voting rights, rights to consent to
corporate action and any other rights pertaining to the Allocated
Assets subject to such direction as the Board may provide, and
shall perform such other functions of investment management and
supervision as may be directed by the Board.
(b) The Fund hereby authorizes any entity or person
associated with the Subadviser which is a member of a national
securities exchange to effect any transaction on the exchange for
the account of the Fund which is permitted by Section 11(a) of
the Securities Exchange Act of 1934, as amended, and Rule 11a2-
2(T) thereunder, and the Fund hereby consents to the retention of
compensation for such transactions in accordance with Rule 11a2-
2(T)(a)(2)(iv). Notwithstanding the foregoing, the Subadviser
agrees that it will not deal with itself, or with members of the
Board or any principal underwriter of the Fund, as principals or
agents in making purchases or sales of securities or other
property for the account of a Fund, nor will it purchase any
securities from an underwriting or selling group in which the
Subadviser or its affiliates is participating, or arrange for
purchases and sales of securities between a Fund and another
account advised by the Subadviser or its affiliates, except in
each case as permitted by the 1940 Act and in accordance with
such policies and procedures as may be adopted by a Fund from
time to time, and will comply with all other provisions of the
Governing Documents and the Fund's then-current Prospectus and
Statement of Additional Information relative to the Subadviser
and its directors and officers.
4. The Subadviser may delegate to any other one or more
companies that the Subadviser controls, is controlled by, or is
under common control with, or to specified employees of any such
companies, certain of the Subadviser's duties under this
Agreement, provided in each case the Subadviser will supervise
the activities of each such entity or employees thereof, that
such delegation will not relieve the Subadviser of any of its
duties or obligations under this Agreement and provided further
that any such arrangements are entered into in accordance with
all applicable requirements of the 1940 Act.
5. The Subadviser agrees that it will keep records relating
to its services hereunder in accordance with all applicable laws,
and in compliance with the requirements of Rule 31a-3 under the
1940 Act, the Subadviser hereby agrees that any records that it
maintains for the Fund are the property of the Fund, and further
agrees to surrender promptly to the Fund any of such records upon
the Fund's request. The Subadviser further agrees to arrange for
the preservation of the records required to be maintained by Rule
31a-1 under the 1940 Act for the periods prescribed by Rule 31a-2
under the 1940 Act.
6. (a) The Subadviser, at its expense, shall supply the
Board, the officers of the Trust, and the Manager with all
information and reports reasonably required by them and
reasonably available to the Subadviser relating to the services
provided by the Subadviser hereunder.
(b) The Subadviser shall bear all expenses, and shall
furnish all necessary services, facilities and personnel, in
connection with its responsibilities under this Agreement. Other
than as herein specifically indicated, the Subadviser shall not
be responsible for the Fund's expenses, including, without
limitation, advisory fees; distribution fees; interest; taxes;
governmental fees; voluntary assessments and other expenses
incurred in connection with membership in investment company
organizations; organization costs of the Fund; the cost
(including brokerage commissions, transaction fees or charges, if
any) in connection with the purchase or sale of the Fund's
securities and other investments and any losses in connection
therewith; fees and expenses of custodians, transfer agents,
registrars, independent pricing vendors or other agents; legal
expenses; loan commitment fees; expenses relating to share
certificates; expenses relating to the issuing and redemption or
repurchase of the Fund's shares and servicing shareholder
accounts; expenses of registering and qualifying the Fund's
shares for sale under applicable federal and state law; expenses
of preparing, setting in print, printing and distributing
prospectuses and statements of additional information and any
supplements thereto, reports, proxy statements, notices and
dividends to the Fund's shareholders; costs of stationery;
website costs; costs of meetings of the Board or any committee
thereof, meetings of shareholders and other meetings of the Fund;
Board fees; audit fees; travel expenses of officers, members of
the Board and employees of the Fund, if any; and the Fund's pro
rata portion of premiums on any fidelity bond and other insurance
covering the Fund and its officers, Board members and employees;
litigation expenses and any non-recurring or extraordinary
expenses as may arise, including, without limitation, those
relating to actions, suits or proceedings to which the Fund is a
party and the legal obligation which the Fund may have to
indemnify the Fund's Board members and officers with respect
thereto.
7. No member of the Board, officer or employee of the Trust
or Fund shall receive from the Trust or Fund any salary or other
compensation as such member of the Board, officer or employee
while he is at the same time a director, officer, or employee of
the Subadviser or any affiliated company of the Subadviser,
except as the Board may decide. This paragraph shall not apply to
Board members, executive committee members, consultants and other
persons who are not regular members of the Subadviser's or any
affiliated company's staff.
8. As compensation for the services performed by the
Subadviser, including the services of any consultants retained by
the Subadviser, the Manager shall pay the Subadviser out of the
management fee it receives with respect to the Fund, and only to
the extent thereof, as promptly as possible after the last day of
each month, a fee, computed daily at an annual rate set forth on
Schedule A annexed hereto. The first payment of the fee shall be
made as promptly as possible at the end of the month succeeding
the effective date of this Agreement, and shall constitute a full
payment of the fee due the Subadviser for all services prior to
that date. If this Agreement is terminated as of any date not the
last day of a month, such fee shall be paid as promptly as
possible after such date of termination, shall be based on the
average daily net assets of the Fund or, if less, the portion
thereof comprising the Allocated Assets in that period from the
beginning of such month to such date of termination, and shall be
that proportion of such average daily net assets as the number of
business days in such period bears to the number of business days
in such month. The average daily net assets of the Fund or the
portion thereof comprising the Allocated Assets shall in all
cases be based only on business days and be computed as of the
time of the regular close of business of the New York Stock
Exchange, or such other time as may be determined by the Board.
9. The Subadviser assumes no responsibility under this
Agreement other than to render the services called for hereunder,
in good faith, and shall not be liable for any error of judgment
or mistake of law, or for any loss arising out of any investment
or for any act or omission in the execution of securities
transactions for a Fund, provided that nothing in this Agreement
shall protect the Subadviser against any liability to the Manager
or the Fund to which the Subadviser would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder. As used in
this Section 9, the term "Subadviser" shall include any
affiliates of the Subadviser performing services for the Trust or
the Fund contemplated hereby and the partners, shareholders,
directors, officers and employees of the Subadviser and such
affiliates.
10. Nothing in this Agreement shall limit or restrict the
right of any director, officer, or employee of the Subadviser who
may also be a Board member, officer, or employee of the Trust or
the Fund, to engage in any other business or to devote his time
and attention in part to the management or other aspects of any
other business, whether of a similar nature or a dissimilar
nature, nor to limit or restrict the right of the Subadviser to
engage in any other business or to render services of any kind,
including investment advisory and management services, to any
other fund, firm, individual or association. If the purchase or
sale of securities consistent with the investment policies of a
Fund or one or more other accounts of the Subadviser is
considered at or about the same time, transactions in such
securities will be allocated among the accounts in a manner
deemed equitable by the Subadviser. Such transactions may be
combined, in accordance with applicable laws and regulations, and
consistent with the Subadviser's policies and procedures as
presented to the Board from time to time.
11. For the purposes of this Agreement, the Fund's "net
assets" shall be determined as provided in the Fund's then-
current Prospectus and Statement of Additional Information and
the terms "assignment," "interested person," and "majority of the
outstanding voting securities" shall have the meanings given to
them by Section 2(a) of the 1940 Act, subject to such exemptions
as may be granted by the SEC by any rule, regulation or order.
12. This Agreement will become effective with respect to the
Fund on the date set forth opposite the Fund's name on Schedule A
annexed hereto, provided that it shall have been approved by the
Trust's Board and, if so required by the 1940 Act, by the
shareholders of the Fund in accordance with the requirements of
the 1940 Act and, unless sooner terminated as provided herein,
will continue in effect for two years from the above written
date. Thereafter, if not terminated, this Agreement shall
continue in effect with respect to the Fund, so long as such
continuance is specifically approved at least annually (i) by the
Board or (ii) by a vote of a majority of the outstanding voting
securities of the Fund, provided that in either event the
continuance is also approved by a majority of the Board members
who are not interested persons of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting
on such approval.
13. This Agreement is terminable with respect to the Fund
without penalty by the Board or by vote of a majority of the
outstanding voting securities of the Fund, in each case on not
more than 60 days' nor less than 30 days' written notice to the
Subadviser, or by the Subadviser upon not less than 90 days'
written notice to the Fund and the Manager, and will be
terminated upon the mutual written consent of the Manager and the
Subadviser. This Agreement shall terminate automatically in the
event of its assignment by the Subadviser and shall not be
assignable by the Manager without the consent of the Subadviser.
14. The Subadviser agrees that for any claim by it against
the Fund in connection with this Agreement or the services
rendered under this Agreement, it shall look only to assets of
the Fund for satisfaction and that it shall have no claim against
the assets of any other portfolios of the Xxxxx Xxxxxx Income
FundsTrust.
15. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no
material amendment of the Agreement shall be effective until
approved, if so required by the 1940 Act, by vote of the holders
of a majority of the Fund's outstanding voting securities.
16. This Agreement, and any supplemental terms contained on
Annex I hereto, if applicable, embodies the entire agreement and
understanding between the parties hereto, and supersedes all
prior agreements and understandings relating to the subject
matter hereof. Should any part of this Agreement be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding on and shall inure to the benefit of
the parties hereto and their respective successors.
17. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the
State of New York.
[signature page to follow]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly
authorized.
XXXXX XXXXXX FUND MANAGEMENT LLC
By:_______________________________
Name: Xxxxxx Xxxxxxx
Title: Director
SALOMON BROTHERS ASSET MANAGEMENT
INC
By:_______________________________
Name: Xxxxxx Xxxxxxx
Title: Managing Director
The foregoing is acknowledged:
The undersigned officer of the Trust has executed this
Agreement not individually but in his/her capacity as an officer
of the Trust. The Trust does not hereby undertake, on behalf of
the Fund or otherwise, any obligation to the Subadviser.
XXXXX XXXXXX INCOME FUNDS
By:_______________________________
Name: R. Xxx Xxxxxx
Title: Chairman
ANNEX I
Not applicable.
SCHEDULE A
SB Capital and Income Fund
Fee:
The following percentage of the Fund's average daily net
assets:
0.375
